TSX extends rebound as investors eye ’Santa Claus rally’

TSX ends up 0.6% at 24,748.98

Energy sector advances 2%

Materials group adds 0.7%

Eight of 10 major sectors end higher

(Updates at market close)

Dec 23 (Reuters) – Canada’s main stock index rose on Monday, led by gains for resource shares as the seasonal optimism of investors offset an uncertain outlook for the Canadian economy and domestic political uncertainty.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 149.50 points, or 0.6%, at 24,748.98, extending its rebound from a six-week low on Thursday.

U.S. markets also notched gains after a stopgap government funding bill averted a U.S. government shutdown.

“We’re seeing the beginnings of a ‘Santa Claus rally’ as stocks continue to show strong momentum into year-end,” said Brandon Michael, senior investment analyst at ABC Funds, referring to the tendency for stocks to advance in the period around the Christmas Day holiday.

The TSX has climbed 18.1% since the start of the year. Still, that is less than the roughly 25% advance for the S&P 500.

“While the TSX is up today, it’s lagging behind, and that’s reflecting narrower breadth and a lack of exposure to high-growth sectors like AI, robotics, and quantum computing in Canada,” Michael said.

“Additionally, the Canadian economy is facing challenges, not being helped by the current political situation, and the Canadian dollar is under pressure with the need for potentially more aggressive rate cuts.”

Minutes from the Bank of Canada’s December meeting showed the decision to opt for a larger than usual 50-basis-point interest rate cut reflected a weaker outlook for growth than forecast in October.

Canadian Prime Minister Justin Trudeau, whose party looks set to lose power early next year, is under increasing pressure from his own legislators to step down and let someone else take over.

The energy sector rose 2% even as the price of oil settled 0.3% lower at $69.24 a barrel. The materials group, which includes metal mining shares, also notched gains, advancing 0.7%.

Eight of 10 major sectors ended higher. (Reporting by Fergal Smith and Ragini Mathur; Editing by Krishna Chandra Eluri, Tasim Zahid and Chris Reese)